Legal cannabis has a cash-only problem. Most medical dispensaries refuse to accept anything but banknotes, forcing some customers to withdraw cash from the ATM machine collecting dust in the corner of the store.
At the end of the day, cannabis business owners hide their stash of money in large safes, false bottoms or designated “cash” rooms. High profit establishments typically hire bodyguards to monitor the cash, while waiting for an armored truck to pick up their earnings. Some stores use the cash to pay for bills, settle large payments and cover employee wages.
This unnecessary handling of money has made some marijuana dispensaries a target for theft. At the moment, mainstream financial institutions are hesitant about offering banking services to businesses in the sector, because the herb is still illegal under federal law.
Ohio wants to put an end to the current throwback methods of handling cash in the industry. The city is exploring the application of a closed-loop payment system, which would offer more flexibility for customers, patients and dispensaries. The system works like a prepaid gift card or a mass transit card that you can reload when funds are low.
“We are just beginning the process to set up Ohio’s Medical Marijuana Control Program, and no decisions around a closed-loop payment system have been made at this time,” said Kerry Francis, a spokeswoman for the Ohio Department of Commerce. “Also, there haven’t been any decisions around banking regulations.”
Officials explained that the system would work by allowing account holders to fund an account using a check, credit card or cash. When choosing the last option, individuals are required to complete the transaction at “a state-licensed liquor store, deputy registrar or other state agency that takes payments.” People could then pay for products using a card that is associated with their account. Canna-businesses (dispensaries, research centers and cultivators) could also use the system to pay monthly bills. However, if the establishment wants to perform a transaction outside of the system (for example, paying a third-party service provider without an account in the closed-loop system), the state would step in and pay the entity by cutting a check.
Will it Work?
The closed-loop system is a huge upgrade from the current cash-only option, but it’s far from perfect. If the Ohio Department of Commerce chooses to move forward with the program, it could lead to unwanted processing and maintenance fees, which would be shouldered by businesses in the sector and account holders. Many see the proposal as a temporary, short-term solution, because it does not provide the same level of versatility that mainstream payment systems currently offer.
“Can it ever be implemented properly if they’re not going to use known technology from a known provider?” questioned Heather Molloy, a local cannabis consultant.